MERS, the law, and the State

By lambert strether.

The current version of Harpers — go buy it on the newstand! — has a terrific article by Christopher Ketcham on the MERS mess, which NC has done so much to bring to the attention of the public. I’m going to excerpt and contextualize two portions of the article. First, Ketcham interviews foreclosure activist Vermont Trotter of Coeur D’Arlene, Idaho on the “clouded title” problem. I’m a connoisseur of the worst case scenario, and this is a doozy:

Trotter told me that the “true horror” of MERS [1818 Library Street, Suite 300
Reston, VA 20190
, 1-800-646-6377] was what it could do to homeowners who were current on their mortgage payments: The “good” homeowners who still had a job and weren’t facing foreclosure. If there was no legal record of which bank owned their debt [see below if you haven’t been following NC on MERS], and the MERS-mortgaged homeowners had been making payments, then who exactly was the homeowner paying? The checks, clearly, were going out every month, cashed by a bank that claimed to own the note. But without the legal record to certify the owner of the note, it followed that the bank could not legally issue the homeowner a clear title to the home. In effect, a homeowner with MERS on his mortgage could spend thirty years paying a lender that wasn’t the owner of the note. …. “[Y]ou’d always be looking over your shoulder,” said Trotter. “Some other lender could come and say ‘No, we owned that note. You paid the wrong guy.” “WIth MERS”, he said, “nobody owns anything. You’re only paying rent.”

That’s not a bug. It’s a feature. At least for a rentier, although not necessarily for Trotter.

Second, Ketcham offers a lucid and succinct explanation of how this MERS feature came to be implemented:

[Mortgage Electronic Registration Systems] was created in 1995 as a privately held venture of the major mortgage-finance operators… Its stated purpose was to manage a confidential electronic registry for tracking of the sale of mortgage loans between lenders… No longer would the traffickers in mortgages have to document their transactions with county clerks, nor would they have to pay the many and varied courthouse fees… This centralized database facilitated the buying and selling of mortgage debt at great speed and greatly reduced cost. … Without the efficiencies [dread word] of MERS there probably would never have been a mortgage bubble.

After the housing market collapsed, however, MERS found itself under attack in courts across the country. MERS had single-handedly [oh?] unraveled centuries of precedent in property titling and mortgage recordation, and judges in state appellate and Federal bankruptcy courts in more than a dozen jurisdictions — the primary venues where real estate cases are decided — determined that the company did not have the right to foreclose on the mortgages it held. … “There is no evidence of record that establishes that MERS either held the promissory note or was given the authority [to] assign the note,” the Kansas court held. … “It appears that every MERS mortgage,” a New York State Supreme Court judge recently told me, “is defective, a piece of crap.”

“What’s happened,” said Christopher Peterson, a law professor at the University of Utah who has written extensively about MERS, “is that, almost overnight, we’ve switched from democracy in real-property recording to oligarchy in real-property recording.” The county clerks who established the ownership of land, who oversaw the records, were democratically elected stewards of those records, said Peterson. Now a corporation headquartered outside Washington, DC oversaw the records. “There was no court case behind this, no state from Congress or the state legislatures” , Peterson told me. “It was accomplished in a private corporate decision. The banks just did it.

Let’s return to that statement: “The banks just did it,” because it raises a number of questions (not necessarily internally consistent). I feel like this post should have been written by a political scientists with training in computer forensics, neither of which I am. And I’d be really happy if the whole post were completely off base, because while I like imagining worst case scenarios, I don’t like it when they actually come to pass. Nevertheless, if the existence and possible retroactive legalization of the MERS system could raise important questions about the nature of law and the State, we’d better start hashing these questions out now. So, far fetching and blue-skying freely:

1. Doesn’t MERS look just like kleptocracy is supposed to look? Leave aside the banks’ outright looting of $200 billion or so in recording fees (so far). Even if those billions would go a long way toward solving the fiscal crisis at the state and local level. Haven’t the banks just appropriated for themselves the very ability to claim the title to hundreds of billions of dollars worth of housing stock? “You own your house if we say you own it..” Well, who owns your house, then?

2. If MERS is what banks can “just do,” is government really the problem?” Aren’t we already living in a libertarian paradise just like the Somalians, except that we’ve got a lot more stuff and a lot more delusion about the warlords who run the country?

3. If MERS controls the chain of title, where and what is the law? Apparently, the supreme law of the land is no longer to be found in in the “the code” — the state and local statutes, rules, regulations, interpretations, and precedents that lawyers and officials and citizens work with. No, so far as I can tell, “the code” is now the computer code of the MERS registration system itself, because the computer code controls the chain of title. But the MERS computer code is proprietary and opaque, so citizens can’t really know what the law is anymore (and possibly not even the MERS programmers themselves, if the system is poorly documented (as it might well be, to provide executives bent on accounting control fraud with plausible deniability)).

4. If MERS is the law, then where is the State? If the supreme law of the land is embodied in software and not controlled by the State as we know it — and empirically it’s not, because with MERS “the banks just did it” — then where is the State to be found? And how does the State gain legitimacy? Does that even matter?

NOTE 1 Questions 3 and 4 are not as far-fetched as they might seem. For example, election results are controlled by proprietary software that’s both proprietary and known to be insecure. And yet election results using these systems are presumed to be legitimate, both by voters and the powers that be. In the FISA debacle, the Fourth Amendment was destroyed by the retroactive legalization of Bush’s program of warrantless surveillance; “the law” was reverse engineered from an already running data mining system.

NOTE 2 If all the title assignments performed under MERS are indeed “crap,” that would give an additional motive — besides pure greed and the lust to inflict pain on the powerless — for the banksters to avoid cram down, HOLC, and any other solution that would involve opening up the MERS can of worms systemically.

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. joanna

    This is actually the destruction of the notion of private property. I guess you’d have to leave it to the capitalists to accomplish this.

    1. jake chase

      This problem has bothered me since the mortgage fiasco first erupted. I would not feel comfortable buying a house that was mortgaged at any time since MERS took control. Who knows who owns that mortgage? Who knows whether the satisfaction issued at a title closing is any good? Everybody who knows anything about real estate knows that every title company is captialized thinly and has always been insolvent in the face of anything like this. Inevitably, there will be a Congressional statute removing the mortgage cloud from all those titles. Most likely, the Fed will end up owning all the mortgages and simply write off the ones that homeowners have stopped paying. Who knows how long the remaining debtors will keep paying? That is the really interesting question.

      1. rd

        I live in NYS is a house that was remortgaged in 2003 by Countrywide. I haven’t dug out the paperwork but would assume that it is a MERS loan as it was Countrywide’s fundamental business model at that time.

        The mortgage rates have dropped quite a bit since then and we asre looking to remortgage (we are not underwater and our housing market has been very stable and affordable, except for property taxes, over the past 20 years).

        We probably won’t finish paying off the new mortgage for seven to ten years, so I am figuring that the new lender would be a partner (of sorts) in getting a firm release of that Countrywide mortgage since they won’t want to be second in line. It will be interesting to see if BoA can actually come up with the paperwork.

      2. Michael Olenick

        One of the features of the house I bought is it was a historic building moved around the corner (somebody wanted a tennis court) to the lot its on now, where I bought it. The lot’s been empty for decades, part of a mega-lot for a mansion that burned down in the 1940’s, and the home was moved w/ private money and city backing.

        That’s a long way of saying besides that I love my house, MERS has never had anything to do with it. I bought it w/ my life savings and, while there are ways to clear title, there was no way I’d be willing to gamble on that on a foundation as rickety as MERS.

        The $200B figure seems frothy though. If 67MM mortgages transferred 24 times a year, being swapped on and off balance sheets 2x/month, and remained there for three years average (assuming the swapping stopped when the music ended), and the average recording fee is $25, that comes to $120.6 billion. Of course, that’s still a lot of money.

      3. James Cole

        If there is a federal statute that “cleans up” the MERS mess it would necessarily be a fairly radical change because heretofore, property laws were controlled by the individual states. So you’d be opening up a whole area for litigation and dispute over whether and under what circumstances the federal law pre-empts the state law concerning transfer of property. By way of example, ERISA was passed in 1974 and there is still ample litigation today over the exent to which state insurance, banking, pension, employment and fiduciary law is pre-empted by ERISA.

    2. Victor Berry

      Does anyone know of homeowners who celebrate paying off their house mortgages by throwing a party and burning the bank’s note? MERS could make that celebratory practice a gigantic error in judgment!

      1. surferdude

        paid off a first and second originated by GMAC in 2009. the first was sold to FNMA and was in MERS. after payoff, both notes were not returned after request was made to GMAC. i am firmly convinced GMAC no longer had the original notes. the lien release on both liens were robosigned. i had a RE attorney review the docs and title before we put the property on the market. luckily, we sold the property in 2010. i would never buy a property that has been listed in MERS.

    1. jest

      Many African nations (sometimes forced by the IMF) adopted fairly radical neo-liberal policies. Flat taxes, minimal state regulation & enforcement, etc.

    2. don

      Meaning if one really wishes to live in a libertarian paradise (read: stateless), Somalia is what one gets.

      The libertarian (NOT civil libertarian) wants all social relations to be mediated by the private market. Being that the market holds no claim to equality, those with power, both politically and economically, hold sway over the market to fulfill their most excessive desires, free of anything resembling a regulatory state; stateless . . . where markets are completely self-regulating, with no interference from the state. Sounds like Somalia.

    3. marcos

      As a green anarchist, I, for one, welcome our new libertarian overlords. The global petroleum production and distribution system requires a massive and expensive coercive structure to maintain property relations and control over resources. Currently these costs are socialized via the US military. Before the wars, 1/5 of Pentagon spending went to enforce petroleum production and transportation. Once guvmint gets out of the business of enforcing petroleum law in a low-tax non-coercive libertarian paradise, industrial society will come crashing down in a smoldering hunk and the earth will begin to recover.

      Yes, I am probably going to reregister so that I can vote for Ron Paul in the CA primary.

      1. Binky the perspicacious bear

        Not true but charmingly naive. In the absence of state run force a private force will arise for the use of the wealthy. Dyncorp, Brownwater/Xi/Academi, and countless others will rise up to do the bidding of those who demand their way at your expense. Democracy without recourse to force is wolves and sheep voting on what lunch is going to be.

        1. rd

          There was a pretty long period of “libertarianism” throughout Europe after the Roman Empire fell. I believe they called it the “Dark Ages”.

          1. Antifa

            Libertarianism only works if it is expressed purely and absolutely, with no half-measures allowed.

            I know of only one genuine Libertarian in all of human history.

            His name was Genghis Khan.

          2. marcos

            Feudalism was not libertarianism.

            Feudalism was also the last time that human habitation had not sent various critical ecosystems into death spiral tailspins, risking a good chunk of life on the planet.

            People worked about 185 days per year, mostly during the summer.

        2. Procopius

          I highly recommend a book called “Nonzero”, by Robert Wright. It contains a wealth of anthropological information about the development of societies, from the simplest, most “primitive” known (he cites the Shoshone of the American Southwest), through modern globalism. His thesis is that there is a central tendency to increased organization, development of institutions which promote trust, and which allow for more and more complex “non-zero-sum games.” What we see in Somalia is removal of a central authority, and a natural reversion to a “lower” level of organization. This means there is no mechanism to enforce agreements and terms of commerce, so people can’t trust each other and trade breaks down. I think you’re right that this is the natural outcome of libertarianism.

        3. nonclassical

          ..perusing Chris Hedges report-lawsuit against Obama for signing NDAA last month, there is a high expectation of taxpayer=U.S. citizen revolt, due to social=economic impact
          of events to soon transpire, that is leading government to
          desire military control and extra surveillance of all sorts
          to quell “unrest”…

  2. Left of Che

    So the financial jiggery-pokery around Dubya’s plans to create an ownership society actually created a generation of insolvent stealth renters?

    Of course it did. When someone with that much money behind him says he wants to help people own things, he’s not talking about you.

    Scratch that, he is talking about you. As one of the things to be owned.

    1. BillyBob

      “So the financial jiggery-pokery around Dubya’s plans to create an ownership society actually created a generation of insolvent stealth renters?”

      Let’s see. 1995 – MERS created. Who was President then?

      1. Left of Che

        I was referring to the general push to get everyone and their dog into mortgage-financed home purchasing, a game in which MERS and other industry-wide rule-skirting practices played a critical facilitating role.

  3. brian

    and obama knows and doesn’t want to do anything about it
    is it the short comings of a harvard law degree or something else??

    1. Francois T

      It’s “something else” and it is spelled “C-A-M-P-A-I-G-N C-O-N-T-R-I-B-U-T-I-O-N-S”, a.k.a. legalized bribery.

      1. Antifa

        President Geithner will not permit the guy in the Oval Office to go after the big banks on anything.

        Nor will he permit Iran to run a Central Bank that is not a member of the BIIS, nor permit Iran to barter, sell or in any way swap their oil for anything but dollars.

        The last two Middle Eastern countries who tried that shit got bombed until that little detail was corrected.

  4. Middle Seaman

    It seems to me that good forensic/programming/legal work can unwind the MERS jungle and generate complete chains of ownership of properties. All the entities involved in the sharad maintain complete record. I may be totally wrong. The law, i.e. government, can then demand full retroactive payments for property recording and levy fines on those who broke the law.

    Of course, the law (Obama and Holder) works for the MERS through the banks.

    1. Michael

      There is no way that motu want to unwind anything except your possible ownership of your home. The few state AGs that are not part of the large whitewashing of the crimes will probably come to nothing. Even if they are not dissuaded by the wh or eric holder, the US congress will probably pass a retroactive exemption that will override the states. IIRC, there was a little matter of a fisa vote.

      1. Francois T

        As far as the Constitution is concerned, Congress can go f*** itself. Real estate law is state law and Congress would need to persuade the Supreme Court PUBLICLY that 200 years of case law should be brushed aside.

        Furthermore, this edition of the Supreme Court has a LOT of sympathy for State rights; they would contemplate a Congressional request to trample said rights with extreme hostility.

        1. Michael

          The court doesn’t seem to have any problem coming down on the side of the big corpses. There are a few judges that seem to want to straighten out the mess, but other judges and legal entities have had several opportunities (especially the congress) but have not tried very hard to enforce the law or investigate.

    2. Cap'n Magic

      you’re assuming that MERS has adequate logs of all transactions from the time of their incorporation, and that they haven’t had a serious issue with data accuracy and also have a tested business continuity plan should they lose their data center.

  5. Keith in Modesto

    The mortgage on my condo is with Bank of America, after they bought out Countrywide. Should I be concerned that BofA may not really be the owners of my mortgage? How can I find out whether, once I have made my final mortgage payment, BofA can transfer to me clear title to my property?

    1. Bill C

      Keith, you can write to Bank of American for a copy of the title. I did this, BoA wrote back saying they do not know of any law that requires them to furnish me with that info.

      Further, they said they would be reporting my inquiry to the credit bureaus…….nice guys eh ? I’ve had the mortgage since ’04, auto payments, thus never missed, never late.

      These people are despicable.

      1. Jane Doe

        You always sue them over the issue seeking injunctive relief that requires disclosure of the documents as you would be the victim of an ongoing fraud, or some other potentially damaging tort/contractual damage issue, would only be guaranteed relief through production of the document.

      2. PL

        Send a letter to the servicer containing the magic words “Qualified Written Request.” Here is a sample letter from HUD:
        In your case, send the QWR letter requesting information about the current ownership of your promissory note, all past owners of your promissory note, all assignments of your mortgage and the current version of your “MERS MIN milestone report”:

        1. 2little2late

          The letter you send to B of A with the magic words “Qualified Written Request” will be returned to you after the time allotted by law with the magic words “Your Request Is Overly Broad”, and that’s the end of that. Why? Because they can. They went to Harvard too. It’s a club thing.

          1. furiouscalves

            then when you get some more information on your deal and write another laser focused QWR, the reply will be that the information “is proprietary”, which is also like being in a club.

          2. securecare

            When you send the letter also send a notorized copy to your county clerk (where all the paper work is supposed to be registered and fees paid) AND your state’s Attorney General.

          3. Robert

            A little naive Yves. 2little2late is correct that any QWR will be returned effectively unanswered.

            I successfully sued BofA for $3900 for incorrectly calculating a payoff demand statement. I had my full payment history and BofA’s only defense was that I should attempt to collect the $3900 from the original servicer (the servicer Countrywide bought the loan from). The judge quickly sided with me on the $3900.

            However, when I tried to bring up BofA’s non-response responses to my QWR, the judge immediately started defending the bank and the fact that they have to deal with thousands of meaningless QWRs. BofA’s representative didn’t even have to defend the point, the judge did it for him.

            So I did get the $3800, but from BofA’s perspective their non-response was a free option.

            Note that I submitted 3 QWRs to deal with the “pattern” requirement. The second two QWRs were written with the help of an attorney friend. Letters 2 and 3 were written after the loan was paid. On their second and third responses, BofA replied that since the loan had been paid they didn’t need to respond to any QWRs. This in spite of the fact that the law requires QWRs be responded to for 1 year after payoff.

            My third letter even quoted the pertinent code requiring response for 1 year. As with response 2, the letter was clearly never even read, a computer just noted that the loan was paid and spit out the programmed form letter.

            In any event, it should have been an air tight case for the QWR non-response penalty to apply, and the fact that there was a rather large mistake in my loan should have motivated the judge to sanction BofA, but instead the judicial system seems to have no interest in punishing bad behavior.

            At least in my case I recovered the $3900, but one has to imagine there are many cases where during refinance, payoff, or foreclosure the banks are unjustly enriching themselves as they attempted to do with me.

        2. enouf


          Might i also suggest you send handwritten letters to;

          a) Your U.S. Senator (
          b) Your Congressional District Critter

          (All done via Certified U.S. Mail ofcourse)

          Hopefully out there in Modesto, your creature is one of the
          lesser-reptilian types; more like Sanders, Kucinich, Grayson..

          FWIW, Obama does read 10 letters a night, IINM;
          “Ten Letters: The Stories Americans Tell Their President”

          Hrm.. I seem to recall 30 years ago or so that when one
          had any sort of issue with the ‘powers that be’, all you
          had to do is run to the local or regional media with
          outrage .. the bad publicity got attention and made things
          happen (if not just the threat). Does anyone still not *know*
          why our MSM are nothing but bought and paid shills yet?

          I could go on for hours… and ..sigh.. i have so much to say,
          but it pertains to other recent articles here at NC.. but
          thanks to (mostly ;-)) all whom reply here. Naturally, a
          hughe wholehearted thanks for this blog at all even Yves.

          Note[1] I finally comprehended one of skippy’s posts in
          the recent Stoller thread, hehe, where Building Codes
          and McMansions were concerned (I’m in the building
          trades myself).
          knowbuddhau, F.Beard, Susan the other, and so many
          others contribute so much to help me maintain sanity.

          Note[2] I loathe typing into small little boxes …so, i’m
          doing all this in Nano :-P (or Vim, or Emacs, or ..)
          then just Copy/Paste — hope it looks formatted ok.

          Note[3] I think i prefer this Note[*n] format over talking
          to myself as a last minute P.S.-to-self, heh.

          Note[4] FWIW, ‘skippy’ swap out your ([) key with a (‘) one;
          F.Beard, i know you meant ‘personnel’ in aforementioned
          Matt Stoller thread i speak of.. constructively noting
          is all, i hope. Godspeed.

          Thanks .. i finally feel caught up enough with reading so
          many interesting articles _and_ their comments, to reply in
          a somewhat timely manner, so as not to go unseen forever ;-).

          1. enouf

            I guess i need to learn older html formatting before attempting even inserting direct URLs/URIs using protectionist email ” style tags;

            “Ten Letters: The Stories Americans Tell Their President”

            and “(” was supposed to be;

   i loathe being boxed in … and, i wish you would have a; ‘5…10_minute_editing_your_own_last_post_window_of_opportunity
            Thanks again

      3. YankeeFrank

        I got the same result from BofA. I’m pretty sure my mother-in-law’s countrywide mortgage was not transferred properly (given the deposition testimony to that effect), and am rightly concerned about potential title issues down the line. Perhaps if they won’t respond to a letter from me they will from a lawyer…

        1. 2little2late

          Jane trust me, nothing is too difficult for them to deny.

          And you don’t want to mess around with these folks. Every time a mortgage is written with MERS as the mortgagee, a kitten in Reston Virginia is euthanized.

          1. different clue

            Forgive my tinfoily suspicion, but you certainly seem like a pro-MERS pro-gangbanker plant of some sort; sent here to sow downcast despair on every discreet suggestion offered to attack certain elements of the problem. Is your mission to pre-discourage people in advance from pursuing these legal step-by-step steps to ascertain the fraud-proof theft-proof reality of their mortgage?

            If thousands of people separately take these thousands of steps thousands of times, and all report their results back to NaCap or other aggregators and publicisers of experience; then lines and angles of attack may be sharpened and improved. I suggest that people keep at it and keep sharing their results. I know that’s what I would/will do if I were/become a homeower.

            And what if hundreds of thousands or millions of not-yet-homeowing wannabe-homeowers get total and complete information on what really is klepto-proof proof of ownership of all aspects of ownership or even just assignable owership of a home? And refuse to even begin entering the homeowing process without proof-positive proof of possession of that proof? They could be little fraud-free zones and coalesce to begin reconquering and de-fraudulating the fraud-zones all around them.

            We have to find and defend our Caves of Yenan before we can reconquer the rest of the country.

          2. PL

            I hear what 2littl2late is saying. Despite statutes giving mortgagors the right to information about their loan, the reality on the ground is that servicers stonewall QWRs. Their contempt for the law and mortgagors is blatant. I share 2little2late’s frustration andthat’s when it’s necessary to file suit.

          3. enouf

            [sorry; but i’m replying actually to “different clue”.. but there’s no ‘Reply’ to his comment available; ..and yes, i now see the formatting issue nonsense with this/all blog/forum software].

            @different clue

            Thanks, you reminded me of one of my #OWS supportive sensibilities; Let us ALL AT ONCE, request/require/demand, (through Attorneys or otherwise) all our “paperwork” (albeit, leins, titles, copies of promissory, receipts of payments (especially the details of how ACF (accounting control fraud) is/was used to affix late [fraudulent] fees/penalties, for the purpose of charging more every month via splitting up a full month’s mortgage payment into these so-called … f***, the silly term escapes me atm, an i cannot find that particular recent article either, atm)).

            Anyways; hope y’all get my drift

    2. Yves Smith

      It is just about certain your mortgage is in a Countrywide securitization and BofA is the servicer (Countrywide serviced the loans it securitized). Countrywide SEC filings reported that Countrywide securitized 96% of the loans it originated.

    3. mk

      Contact a title company and order a chain of title report, or ask your local real estate agent if they can order one for you and at what cost.

  6. Michael

    Just another step on the road to total fascism. The big corpses and their bought-off elected officials are going for total ownership of the whole US. Soon it will extend to the rest of the world. The goal is to collapse the middle class and drive the whole economy into a replica of Haiti. We will all be day laborers no matter what our job titles are if we are not part of the 1%. We won’t even be able to save money in the banks because they will run sweeps through and claim the money because clear ownership will not be able to be shown.

  7. Richard

    Perhaps I am missing something about the MERS database, but I was under the impression from earlier NC posts that it was the responsibility of the “mortgage originator” to “transfer title” to the “owner” [think securitization trust] of the mortgage. This was done by the originator sending an electronic file update to the database.

    Ok, we can assume for the worse case that the originator never updated the database. As a result, the owner of the mortgage is still the originator. Oh what fun…think of firms like New Century Financial, WaMu and others coming back to life!

    1. Gerard Pierce

      Someone else can probably explain this better, but all I am attempting to do is to point out that its not as simple as most people think. A mortgage and the underlying note are two different things. The note requires payment. A mortgage gives the lender the right to foreclose and requires court action to do the actual foreclosure.

      There are two different sets of rules in use by the states mortgages and deeds of trust. A mortgage requires court action to foreclose. A non-judicial foreclosure requires a different set of actions.)

      That assumes that all of the paperwork was filled out correctly and that both note and mortgage were correctly endorsed and transferred.

      There are situations where the mortgage was transferred correctly, but the note was lost somewhere along the way – the mortgage holder has the right to foreclose, but without the note, there is nothing to foreclose against.

      That’s the easy description. The reality is worse and it depends on the attitude of the judge toward “lost” paperwork which might not exist at all.

      There are a few cases in Florida where the judge rubber-stamped foreclosure against the same property by two different supposed lenders. Judges really do not like to be embarrassed in this way.

      1. enouf

        Hi Gerard;

        In no way do i mean to single you out in my comments
        concerning yours.. but one clause/phrase you mentioned is
        need of addressing/clarification in my humble reading.

        “…its not as simple as most people think. ..”

        Noteworthy even (in the sense of how even language is
        conveyed/manipulated, many times *unintentionally*), however,
        also true are the many intentionally misleading usages
        of said verbiage, (or lack thereof).

        For myself and many others, “not simple” is precisely the goal;
        It is the main tool of the devil to *’confuse and
        overly-complicate’* matters of “togetherness”; For,
        Togetherness == God (some might say Oneness, so ok).

        Thanks all

        1. truthteller

          As a former auditor I saw it all the time…the old shell you see it now you don’t…”it’s complicated” is what they say, but the reality is they MAKE it complicated to take advantage of others, to mislead, confuse, deny, conceal, keep othersw from questioning!!! DO NOT LET THESE EVIL PEOPLE GET AWAY WITH IT…FIGHT..BOYCOTT..IF U CAN’T TRUST SOMEONE U CAN’T DO BUSINESS WITH THEM..AND I MEAN ANY AND ALL BUSINESS

    2. Yves Smith

      Oof, no.

      1. A “mortgage” consists of two pieces: a note (a borrower IOU) and a lien on the property. The note must be transferred to the securitization trust (it takes a lot of steps to accomplish this and it must be done by a date certain, we have covered this ground earlier). Confusingly, the lien part by itself is called the mortgage in most judicial foreclosure states (in non-judicial states, the lender has a deed of trust, which means he rather than the borrower has title to the property.).

      2. MERS is a registry for mortgages, meaning liens. Historically, liens were recorded at the local courthouse so anyone who wanted to give a loan secured by property could see whether there was already a lien outstanding. And that is why we have “first” and “second” mortgages. The priority of payment was based on which lien was recorded first.

      1. jake chase

        The idea of mortgage recording acts is to protect subsequent creditors against ‘secret liens’. Suppose a homeowner with a MERS mortgage takes out a second mortgage which is properly recorded? Does this subordinate the MERS mortgage? Has anyone looked into this?

        1. jake chase

          Of course, if the MERS mortgage was properly recorded and only the mortgage assignments are missing, this would not subordinate the MERS mortgage, assuming the owner of this mortgage can establish his chain of title to the Note. Now, if the originator is bankrupt, and the Note was never assigned to the trust, can the bankruptcy be reopened to assign these Notes? Are the Notes now ‘property’ of residual bankruptcy creditors? Do these creditors have an equitable right to an assignment of the mortgage? Does this question vary State by State? One thing is pretty certain: those servicers have no right of foreclosure except in a court determined to ignore the law.

          1. Lyle

            In most bankruptcies there is a trustee selected to manage the affairs of the corp. In addition some successor organization is set up to handle the residual issues. For example in the New Century case it is the US Bankruptcy Trustee. That entity retains the right to sign assignments etc, as needed for the conduct of business. Only when the corporation emerges from bankruptcy would the power transfer to the new owner. As a government office the trustee is immortal as well.

  8. bill

    Most new mortgages and refis are going right back into the mers sewer. Its as if we have collectively and simultaneously lost our minds.

    How can title insurers knowingly clear titles that have the mers taint? How can they in good consience put that same taint on new loans and uninformed victims? Are they all betting on a universal fix? Are they trying to squeeze out a few more years of profits before everything crumbles? Are they quietly being bought by mega banks? Are they shorting their own stock? what gives?

    1. YankeeFrank

      I’ve read on NC that many title insurers are placing exceptions on newly written title policies to the effect that any title questions that arise due to non-recordation or poor transfer practices must be covered by the mortgagor (the originator). Seems to me the main purpose of title insurance is thrown out the window… I guess the only thing it actually covers are any title problems from the ancient past…

  9. DWoolley

    The MERS problem is much worse than is described here. If anyone is interested, look up the senate testimony of R.K. Arnold, former MERS CEO. He stated that MERS does not monitor the database entries or know the accuracy; it is based on the member’s honor system. It is like an Excel spreadsheet.

    I believe MERS members are relying on the fact they have 31 million loans in the system. To big to fail? We’ll see. Although many courts have adverse ruling to MERS, many states are churning out favorable rulings i.e. California, Michigan.

    This discussion may be meaningless, I am anxious to see if the AGs toss in a release from liability for MERS members with the 38 or so AG settlement (let’s agree not to call it a 50 state anymore).


    1. YankeeFrank

      Yes I recall that there are no good logs of the database changes and anyone with a login can wreak havoc. Its the worst possible nightmare scenario if anyone is trying to create an audit trail of transfers, effectively making that impossible. The incompetence and shoddy criminality of our banking system is something to behold.

      1. Francois T

        “The incompetence and shoddy criminality of our banking system is something to behold.”

        Add to the mix the supreme arrogance, incompetence and duplicity of a score federal regulators who fellate to Wall Street while preaching for the magical “regulating with a light touch”, that is, doing nothing that goes against the biggest greedy bastards.

      2. beowulf

        “Yes I recall that there are no good logs of the database changes and anyone with a login can wreak havoc.”

        A good thing those Anonymous folks are powerless when confronted with a password protection or things would really get messy.

    2. 2little2late

      The MERS problem is even worse than the MERS problem. Because every property touches another property, even those millions of properties that aren’t MERS titled or are owned free and clear have their titles screwed because of the touchy feely aspect of adjacency.

      “Thanks to MERS failure to accurately complete and/or publically record property conveyances in the frenzy of banks securitizing home loans and in subsequent foreclosure actions, neighbors to a foreclosed property (with a sequential conveyance) as well as the foreclosed property itself will have unclear boundaries and clouded/unmarketable titles making it difficult, if not impossible, for these homeowners to sell their properties and for subsequent purchasers to obtain title insurance on that property. MERS now keeps electronic records on about half of the home mortgages in the United States.”

      MERS has to go, it’s as simple as that. It’s MERS or us. It’s the ark that holds their covenant, only in this case, this covenant or legally binding agreement binds only one side of the deal, into an arrangement that robs our counties and will force each and every one of us to have to quiet title at our own expense. Devised by rat bastards for rat bastards.

      1. PL

        I don’t see how MERS affects property boundaries and implicates adjacent properties. Boundaries are confirmed by survey. If there’s any question where the property lines fall on the ground, have a retracement survey done.

        1. PL

          OK, I read the ritholz blog that you linked to. Let me clarify my comment to add it refers to adjacent properties, not the MERS property. An adjacent property does not necessarily have a boundary problem if a retracement survey can confirm its property corners marked with clearly identifiable monuments (such as iron pins). I think there are more of those types of properties, at least on the east coast, than properties using other types of monuments. That said, there may be some adjacent properties created out of a common larger parcel with defects in the original survey that subdivided the land. In those cases it will be necessary to go to court to determine common boundaries, but that would be necessary even without MERS on one of the deeds. A defective or poorly written original deed tends to do that.

          1. DWoolley

            The problem is prevalent in the western United States and is not relegated to the eastern states.

            The problem in its simplest form, Farmer A owns 10 acres, he grants to Whiteacre the east 5 acres in 1924 and he grants the west 5 acres to Blackacre in 1928. The land is conveyed several times over the next 70 years. The most recent owner of the Blackacre parcel has a survey completed and it is determined Farmer A only owned 9.5 acres. Who owns how much land? Short answer, the Blackacre successor owns 4.5 acres. Farmer A could not sell what he does not own. Nemo dat quod non habet. This is a common occurrence in land title (gaps and overlaps) which is usually resolved by an examination of the chain of title. MERS has diluted or destroyed the chain of title which has eliminated the non-judicial remedy to the problem.

            The white paper referenced will be published in a tier one law review in March.

          2. PL

            It’s an interesting title issue and your contribution to legal scholarship is noteworthy. My perspective is one of someone who has litigated boundary disputes arising from survey problems. While MERS may make it more difficult to determine title, the underlying problem may have required judicial determination in any case. But there’s no doubt that MERs is an additional complication and will require a whole new layer of analysis by the court.

  10. jonerik

    The problem of having an enforceable right to foreclose on a mortgage by an assignee of the mortgage and note is a separate issue from it having to be filed and recorded. Strictly speaking, even the mortgage need not be filed and recorded if it is only a matter of foreclosing on it for breach. A separate note certainly need not be. The issue of nonfiling and nonrecording would only come up if a second mortgage were granted thus giving priority in right to the second filer. So the mortgage is filed and recorded to protect that priority right only. After that, the recording laws are irrelevant to who comes into ownership or possession of the note and can enforce it by foreclosure. MERS only took advantage of the fact that once a mortgage is recorded, the note (or even the mortgage) becomes a negotiable instrument like a check and the assignee a “holder in due course” for all intents and purposes (though still subject to defenses of the debtor).

    1. elboku

      You are wrong on so many levels that this comment should be removed. I pray you are not a lawyer and hope you wrote the above as a parody of lawyer-talk. It would take a semester’s worth of teaching to begin to address the mistakes you have made. Wow.

      1. jonerik

        If you see a mistake, point it out. Don’t just say “you’re wrong.” I may be wrong in terms of the requirements of standing for foreclosure by advertisement” which may have specific requirements for recording to allow such type of foreclosure. But not for foreclosure by action (i.e through a formal legal proiceeding). The Minnesota Supreme Court and other courts have held that MERS has legal standing to foreclose by advertisement. Are they in need of remedial legal education too?

        1. 2little2late

          Jonerik, in all fairness, if one is going to call out Minnesota’s Supreme Court ruling in Jackson v. MERS as being supportive of the MERS biz model, it needs to be mentioned that the court was simply falling back on what is commonly called “the MERS Statute” which the MN legislature passed prior to Jackson by about five years.

          And it might also help to illuminate the fact that “the MERS Statute” was authored by none other than MERS itself.

          1. jonerik

            So what? It doesn’t change my point. All the “MERS Statute” accomplished was to allow MERS to foreclose by advertisement, an easier procedure than foreclosure by action. It’s not necessary to record a mortgage (or the underlying note) to have standing to foreclose on it. The previous commenter either misunderstood my comment or is extremely confused.

            Now, this is not to disagree with the general thrust of this guest post that MERS foreclosures might be screwing up the chain of title. Or that MERS might be guilty of frauds in some other way, e.g. robosigning documents. My point is just that an unrecorded assignment of a mortgage or note is no defense to a foreclosure.

            Real estate conveyancing and title insurance follow the documents of record, i.e. in the official real property records. So, a purchaser from a sheriff’s foreclosure sale might not be getting good and marketable title if it’s from a MERS foreclosure. But these types of titles are never as good as a warranty deed. That’s what title insurance is for.

          2. 2little2late

            Jonerik, I hate to kick a dead horse, but you keep riding up on one. You are confusing terms here when you write, “My point is just that an unrecorded assignment of a mortgage or note is no defense to a foreclosure.” Or, “It’s not necessary to record a mortgage (or the underlying note) to have standing to foreclose on it.”

            That is clearly wrong, at least as far as Minnesota is concerned. The court went to great lengths differentiating between the note and the mortgage in Jackson v. MERS. They argued that the note does NOT have to be recorded, but the mortgage does, otherwise it would be in violation of “the MERS Statute” previously mentioned, which states,” ….that the mortgage has been recorded and, if it has been assigned, that all assignments thereof have been recorded”.

            Foreclosure by advertisement is not a right, it’s a privilege, and it is strictly construed, and a foreclosing party must demonstrate “exact compliance” with the statute’s requirements. Absent strict compliance, the foreclosure proceeding is void.

          3. jonerik

            It’s not beating a dead horse to clear up a confusion, which you and apparently others on this blog share. Apparently, you never heard of “foreclosure by action” which is another name for a lawsuit to foreclose on a mortgage. In some states, like Wisconsin, that’s the only way a mortgagee can foreclose. There’s no such thing as “foreclosure by advertisement” in these states. Minnesota among other states allow both procedures. To foreclose by action to get a judgment, there is no requirement that the mortgage be recorded. It would not be smart to not record it but there is no recording requirement vis-a-vis the mortgagor.

            As you correctly point out, “foreclosure by advertisement” is a privilege. That procedure is one that completely bypasses the court (unless someone challenges it) and gives the seller the power of sale. If there is no redemption within the statutory period, the mortgagee gets title of the mortgagor, free and clear.

            Now it may be the statute was corruptly drafted and passed by MERS but it does do the job. It only accomplishes what could be obtained through a foreclosure action, which, on the other hand, requires no recording of any documents to have “standing.”

            The land recording system is FUBAR and has been for generations. MERS will not make it any worse than it already was or is. The practice of law has worked around these problems to manage free alienation despite its myriad flaws. I guaranty there will be a practical solution to the cloud on title problems, some of which will entail the expenditure of millions in legal fees. Which is good or ad depending on your perspective. I may not be Oliver Wendell Holmes but 37 years of law practice, much of it in real estate, and I do understand how the legal system and the practice of law work.

  11. EricJ

    Well, it is kind of funny, because county sheriffs are the only duly deputized law enforcement in this great land of ours. And counties are legally the sole arbiters in questions of land ownership in this great land of ours. So, with a thousand or so years of common law as the backing, we could wrest this great land of ours away from parasitical rent takers in one fell swoop.

    Har, only kidding. Super Bowl is coming up. Have some dip. In America, vodka drinks you.

  12. CSTAR

    It used to be that the state had the monopoly of violence.. maybe the state, its legal apparatus and its enforcement mechanisms is now being reduced to proprietary computer code

  13. Paul Tioxon

    The creation of MERS is consistent with the need to clear obstacles in time and space to capital flows.

    When the US needed to physically adapt itself to post WWII modernity, it cleared out the slums of smokestack industrialization. Urban renewal provided huge amounts of capital and jobs to destroy whole neighborhoods and replace them with urban college campuses, interstate highways, such as I-95 on the East Coast, tearing out the river wards of Philadelphia and replacing homes with an elevated concrete super highway, or Robert Moses in NYC, tearing up whole neighborhoods and preparing the foundation for the dominant service sector that replaced factory work, as symbolized by the twin towers built on reclaimed water. Haussmann’s rebuilding of Paris, putting in water and sewer service, tearing down medieval steets so narrow that trade could not be conducted and cholera was a Parisienne feature, opened up the city to build the infrastructure of telecommunication with the telegraph and rapid transit with rail road lines going out to all of France and then, Europe.

    Time and space was an obstacle that slowed down financial trade and the price of commodities in the market being used for the bourse. The telegraph changed all of that. Today, the internet with the World Wide Web obliterates time and space again, but time even more so for Wall St. Banking and capital markets are little more than software programs operated via the internet. The existing fragmented county court house system was an institutional barrier to Wall Street securitization of mortgages, and has been dispensed with. Of course, this did not happen over night nor is it the first instance.

    As I have pointed out in previous posts, Capital One, up until March of 2008, operated an illegal banking business in every state in which it did not possess a state banking license. Up until it needed to get a National Banking Act NA license in order to receive TARP money, it operated solely with a state of Virginia banking license. It has been sued by various state AG’s for NOT being in compliance with the most simple act that any national organization could establish, but Capital One did not. Until it was forced to by the financial crisis.

    MERS is just one more example of the restructuring of America and the world in the service of private capital. Aside from Capital One, the illegal destruction of PSFS bank, known as Meritor financial, during the S&L crises was also found to be an illegal and unwarranted act on the part of the Fed which solely benefited Mellon Bank, which promptly took possession of the retail carcass of Meritor in Philadelpia. The remaining stock holders of record have finally been compensated for this in a law suit that took decades to unravel the truth and pay the dispossessed stock holders, who were mainly small middle class employees who had some shares.

    I could say something like, where was Bill Black when the people of Philadelphia were laid low by losing the biggest bank in the region at the time to Pittsburg financial interests. But I won’t. What I will say, is that for quite a long time and now, even more so with technology, what was already a free-for-all for the richest of the rich and the most powerful of the powerful, has become apparent to all, because now it touches us all. The event of capitalism asserting itself in the face of state institutions that prevent the ciruculation of capital at its maximum efficiency is now THE political struggle of the age. We are not fighting over law and order, we are fighting over this: under what terms capital will decide to be distributed and at what rate of return. Private capital is starving the state not because it believes in some ideology set forth in the Powell Memo, although that is as good a pretext as any for a war against the state’s use of capital for the public good. Private capital does not see the world and the nations of the world as constituted to allow them to invest surplus capital to allow them to not only maximize returns, but continue to do so in an orderly manner in the forseeable future. A New World Order needs to be instituted for this to occur.

    MERS was an acceptable work around and the de-nationalized enviroment of financial deregulation saw capital flood into towns and cities and nations of the world, so much so that even Joe six pack and Susie Soccer Mom felt the wealth effect for over a decade. But the financial innovation has caused its own demise and undue political attention. The MERS systems is a small part of the systemic capitalist order. However, it is at odds with the nation state system. The container of the social order, the state, can not just be dispensed with like a shell corporation that has served its use. The conflict, private capital vs reason of state is a show down that brings to the foreground the contradictions of capitalism and the played out post WWII global nation state order intitued by FDR and the Allies with the complicity of the USSR.

    If MERS is allowed to unilaterally institute itself, it is a political bombshell that eliminates the consent of the governed or the sponsorship of the state, the need for the state to even deliberate on such a wholesale change to law, order and the concepts of property rights. But to tear it apart risks problems, including the public debunking of much of what has passed under the name of captialism, free enterprise and free markets. Freedom for captial, not labor. Since the heart of the matter attacks widely regarded homeownership, a pillar of the New Deal, bringing down the roof of the social order is not a poltical consequence the Democratic Party as a whole, and still many of the Repubican party want to see happen. The calculus of pain, political and human is much too much even for super computes with Wall St algorithms to contemplate. It explains, but should not apologize for anomalous behavior of politicians who do not know which way to turn without bringing down another pillar of the social order, the rule of law. The average person wants and like rules of order because it allows us to calculate far into the future the consequences of our behavior. The government and Democratic party historically, stand for institutions which should pass the test of time and support the comfortable feeling that all of my work and efforts in life have predictable outcomes and they are ensured by the social contract backed by the full faith and credit of the Federal Government. I know I don’t want much of the New Deal or The Great Society renegotiated to spur the wealth accumulation schemes of the millionaires in waiting, who see opportunity snatched by the strictures of instituions that protect the populace as a whole from ruthless exploitation. I know I don’t want private capital with unlimimted power to unilaterally change the longstanding legal arrangements that protect property and homeownership from rapacious profit seeking.

    1. Susan the other

      Paul. Rapacious profit taking combined with excessive productivity combined with high unemployment combined with a financial system without ties to society, etc. is crazy self destruction for everyone. Not only small property owners. Capitalism is just now learning that it can’t work outside “time and space.” Your description of the pedigree of the mess is accurate. The free flow of capital was the holy grail of the cold warriors. But it is now too clever by half. Or “too successful.” Greed is not smart. It is just what happens when we run out of ideas. I wonder if Prof. Stiglitz would refer to MERS as “productivity?” I think MERS is just one more perp that deserves the corporate death penalty.

      This post is encouraging because there are so many readers who understand how devastated the land title system is. No wonder the Banks and the Feds have been trying to keep it quiet. Makes me wonder if Harpers knows about some possible solution being discussed.

    2. Jack Parsons

      There is no solution.

      Paul, thanks for the phrase “outside time and space”. The title to much of MERS real estate also exists outside of time and space.

      Forget the fed, Audit MERS!

      Occupy MERS!

  14. sleeper

    In my area some recent sales of vacation property are touted as having “clear title”.

    The is a relatively new sales pitch and one I suspect is a sort of back handed indication of the mess MERS has made.

    And what to do ?

    If we are truly angry enough to take real action we can use the up coming elections to gently remind the folks at the state / county levels that it is important to collect all of the fees from MERS ? After all collecting all of the fees due means lower taxes for all. And there ought to be more than a few jobs created for clerks to clean up the mess.

    This is an opportunity for folks to have a real impact since the court recorder / clerk of court positions can be determined by a relatively small number of votes.

    As much as I enjoy the comments (and there are some great ones) we need to do more than comment.

  15. Conscience of a Conservative

    What made this country great and successful was that we respected property rights and individual liberties. Sadly this country has moved away from that in favor of big business while stoking the fires of class warfare. I reccomend reading Hernando De Soto to understand why some countries do well and others don’t.

    1. Blissex

      «What made this country great and successful was that we respected property rights and individual liberties.»

      That’s so ridiculous that I guffawed. Jim Rogers of all people wrote that there was no rule of law in the USA in the 19th century.

      Indeed it was all shady deals/fights among plutocrats often whitewashed through their purchased delegations in Congress.

      And if there was a rule of law, consider even just apex laws (which still stand!), a great joke. As to individual liberties, the vast majority of non-wealthy residents had essentially no rights, never mind the dark skinned minority.

      What make the USA prosperous was two things, one major and one minor:

      * Rapacious resource extraction from a rich, largely preserved continent, on which some easily disposed of nobodies were squatting.

      * The Yankee industrial system, which at least for a while added significant value to the resource extraction, and was based on angle-german social culture.

  16. Edmond G. Miranne, Jr.

    The article takes us a step closer to public awareness of the rule of law of United States v. Fox, 94 U.S. 315 (1876) and Sunderland v. United States, 266 U.S. 226, 45 S.Ct. 64, 69 L.Ed. 259 (1924).

    In United States v. Fox the court said:

    “The power of the State to regulate the tenure of real property within her limits, and the modes of its acquisition and transfer … is undoubted. It is an established principle of law, everywhere recognized … that the disposition of immovable property, whether by deed, descent, or any other mode, is exclusively subject to the government within whose jurisdiction the property is situated. … The title and modes of disposition of real property within the State … are not matters placed under the control of Federal authority.”

    In Sunderland v. United States the court, citing Fox, said:

    “The general rule is not to be doubted, that the tenure, transfer, control and disposition of real property are matters which rest exclusively with the state where the property lies … .”

    The statement in the article that the “banks just did it” is a non sequitur. The banks did not and cannot reverse or nullify the rule of law of United States v. Fox and Sunderland v. United States. Furthermore, any state attorney general who signs any document that is inconsistent with this rule of law will, by such signature, violate his or her oath to uphold the laws of the states they serve, and those having the power to impeach a state official for violation of an oath of office will be obliged to do so.

    1. Lambert Strether Post author

      The banks did not and cannot reverse or nullify the rule of law ”

      Well, that’s really the question I’m asking, isn’t it?

      If “they just did it,” and get away with it, they did, didn’t they?

      And if “the law” is retroactively changed to legalize previously illegal behavior, and “the law” is then a reverse engineering of a computer system, isn’t the computer system really the law? That is, a body of intellectual property (the source code) that is now proprietary and not transparent?

      And if that’s so, where and what is the State?

      All that is solid melts into air…

      1. Antifa

        Carl Schmitt (Hitler’s favorite judicial philosopher) said it best back in the days of the Weimar Republic —

        whomsoever can declare the State to be in a state of emergency is the true sovereign.

        Hitler used the Reichstag fire to suspend the Constitution and put Germany on an indefinite emergency footing. Dubya Bush used the Twin Towers to put America on an indefinite emergency footing, which we are still operating on.

        For as long as the war on Terra continues, our government feels free to suspend ANY aspects of our Constitution and laws which interfere with avenging whatever it was that started all this and threatens our liveries or sumthin’ ad infinitum. The emergency will never, ever end, of course.

        The banks presented a financial emergency to Congress and the Executive, and they suspended all the usual laws for dealing with insolvent banks to rescue them instead — rescue them all over the world no matter what it takes or how long or who gets caught in the treads and gears as we progress to 3% annual GDP growth once more.

        So . . . what Magna Carta, what Virginia Declaration, what Constitution, what State Constitutions, what 200 years of property law, what human rights?

        As Carl told Adolf, “If you can ignore the law, you are the law, baby!”

      2. Edmond G. Miranne, Jr.

        It’s not a “question.” It’s well settled law.

        No one “got away” with anything. The issue is being litigated in many courts in many contexts throughout the U.S.

        A judicial reversal of a substantive rule of law will not be retroactive. A statutory reversal with a retroactive clause will not affect established third-party rights.

        The ideas you suggest by your questions do, at least, two things. First, they demonstrate the extreme difficulty and seriousness of the problem. Second, they imply that ideas may exist in some quarters that if brought to fruition would result in the shredding of the Constitution.

        The states are sovereign political entities in a federal system. States have the exclusive right to enact laws affecting real property within their borders and in other areas, such as family and probate law. If you suggest or propose that a change has been or can, will, or should be made in the federal system set up by the Founding Fathers, please say so plainly. Please spare us any “beating around the bush” with questions that fish for the wrong answers by someone else.

        1. Susan the other

          But the enormous mess that MERS has created cannot be resolved state by state in an efficient manner. Not even a legally coherent manner. It will take years of trials and appeals. The situation demands a universal solution. And the only universal authority is the US Congress and or Supreme Court. So it is catch 22 unless the states can agree on some solution. And clearly they are not. If MERS were prosecuted (RICO?) and shut down it might clear the way for the states to act.

  17. Jim A

    I don’t think that the situation is as bad as posited here. There’s no doubt that MERS has impacted the ability of servicers to foreclose, and clouded title to homes upon which they have foreclosed. But failing to properly register the note/deed of trust does NOT seem to imply that the mortgage (the loan itself) is similarly clouded. A lender can’t just show up in court with a note and foreclose. They also need to show that the borrower is in default on the terms of the loan. Even if MERS screwups mean that the mortgage can be removed from the pool and put back to the securitzier, that doesn’t imply that the borrower hasn’t been sending HIS check to the proper party. And even if the servicer or securitizer turns out to be sending the payments to the wrong party, that is NOT the borrower defaulting.

    1. PL

      Some problems may be fixable, but you know the servicer isn’t going to admit mistakes exist. The onus is on the mortgagor to file suit to clean up the MERS created mess and bear all the related costs. Even if the court may award the mortgagor’s legal fees the initial outlay is borne by the mortgagor and collecting can be a hassle. Wasn’t the servicer’s refusal to reimburse legal fees the reason homeowner in Florida executed: On the other hand, the mortgagor gets stuck with the bank’s legal fees pursuant to the promissory note if he cannot completely prove his case. The bottom line is it’s not so easy to work these things out and the costs inhibit many mortgagors from trying.

  18. rjs

    just noticed marketwatch took down the story about the lawsuit against MERS my county filed; here’s the original link:
    the geauga county suit charges that the “defendants systematically broke chains of title throughout Ohio counties’ public land records by creating “gaps” due to missing mortgage assignments they failed to record, or by recording patently false and/or misleading mortgage assignments. Defendants’ purposeful failure to record has eviscerated the accuracy of Ohio counties’ public land records, rendering them unreliable and unverifiable — damage to public land records that may never be entirely remedied” …

    here’s a local link:

  19. Up the Ante

    2. If MERS is what banks can “just do,” .. Aren’t we already living in a libertarian paradise just like the Somalians, except that we’ve got a lot more stuff and a lot more delusion about the warlords who run the country?

    And delusions as to who they employ right down into your local level.

    “to provide executives bent on accounting control fraud with plausible deniability”
    “The banks just did it.“, and who protected them ?

    ” “the law” was reverse engineered from an already running data mining system.”, and protected by an entitled group that explains itself never, and reactive and violently.

    1. Up the Ante

      The “entitled” ones who attempted to Occupy America’s lives during ‘Booshie’s’ terms are now chronicled as serving the fraud.
      ‘Dim’ is found Out.

  20. indio007

    the problem is that MERS does little or nothing to verify actual transfers of notes or mortgages. I saw a suit 8 months ago where a mortgage holder was suing MERS for allowing another MERS member to basically claim their property within their system. The substance of the complaint is that MERS ignored all efforts to correct the problem. It really is the honor system. They have zero verification and authentication of transfers. A MERS member can probably go in and just claim all the property within the electronic system because MERS does require any evidence of ownership.

    It’s really worse than everyone one thinks it is.
    I true ownership is a jumbled mess with only servicers knowing whether payments are current. I also believe that mortgages that go into default are being sold on a secondary market with MERS being more like a pool of mortgages to pick from.

    This would explain these 4-6 year too late assignments , the forged notes, the inability to prove the actual purchase transaction under which they acquired the debt. etc… The last one should be so simple it isn’t even funny. You have to wonder in the cases where the homeowner is winning for lack of documentation , why the bank can’t just whip out a cancelled check, account statement, wire transmittal receipt or the like to prove they bought it.

  21. DWoolley

    Although foreclosed properties may appear to be a “bargain”, no American (from the sophisticated investor to the layperson buying a home for their family to reside) should purchase a foreclosed property owned by a bank or servicer without first taking the following actions with the advice, counsel and assistance of a licensed attorney in your state well versed in real property laws and litigation, boundary disputes, title insurance, financing and contract law (partial list-shortened for blog readability):

    1. Obtain an “Owner’s Policy” from a reputable title insurer in addition to and separate from a “Lender’s Policy”. The Owner’s Policy should contain specific endorsements and should protect the buyer against liens on the subject property. Consult a knowledgeable attorney for the requisite language and endorsements that must be contained in the Owner’s Policy.

    2. Do not buy a foreclosure with a sequential conveyance without obtaining a chain of title on the property to be purchased (and on all adjacent parcels as these may have also been prior foreclosures). If the chain of title cannot be made available, there may be a problem. Refer to Bevilacqua v. Rodriguez (October 18, 2011) 2011 Mass. LEXIS 918.

    3. Retain a qualified attorney to render a written opinion as to the status of title to the foreclosed property, title insurance coverage and any exceptions to title insurance coverage.

    4. Verify that the attorney you retain has proper errors and omissions (malpractice) insurance coverage that exceeds the value of the property you are considering purchasing.

    1. Pearl


      Your advice is great, but, I suppose, too late for this recent Republican Presidential Candidate who purchased a foreclosure property in the Metro Atlanta area last September:
      David Smile (aka David L. Smile) purchases the property on May 31, 2006, according to records filed with the Henry County (Georgia) Clerk of Court:
      (HCDB=Henry County deed Book)
      WARRANTY DEED: HCDB # 9261 page 316 FILED: 06/09/2006 (closing was 05/31/2006)
      From David C. Apanay (aka David Cox Apanay) to David Smile.

      SECURITY DEED: HCDB # 9261 page 317 FILED: 06/09/2006 (see page 318 for amount of Note: $186,400, “Lender” is Fremont) Grantor: David Smile Grantee: Fremont, MERS

      (possibly pertinent–Henry County Deed Book Volume #9261 ENDS right before 2nd Note is recorded)

      SECURITY DEED: HCDB # 9262 page 1 FILED: 06/09/2006 (see page 2 for amount of Note: $46,600, also to Fremont) Grantor: David Smile Grantee: Fremont, MERS

      PT61 FILING: Henry County PT-61 075-2006-006923 (Value of Consideration $233,000, tax paid: $233)

      SECURITY DEED: HCDB # 9958 page 201 FILED: 02/05/2007 (closing was 01/18/2007)
      ( see page 201 for amount of Note: $51,931 to Bank of America, N.A.) Grantor: David L. Smile Grantee: Bank of America, N. A.

      WARRANTY DEED: HCDB # 10546 page 11 FILED: 10/24/2007 (signed on 10/16/2007) Deed grants “Joint tenancy with survivorship” from David Smile to Connie Judge Smile. (Both David and Connie Smile on title now–I think.)

      WARRANTY DEED: HCDB # 10764 PAGE 348 FILED: 03/11/2008 (signed on 03/07/2008) Deed from David Smile granting property to Connie Judge Smile. (Just Connie Judge Smile on title now–I think.)

      PT61 FILING: PT-61 076-2008-001780 (Deed of gift, no tax owed or paid.)

      ASSIGNMENT: HCDB # 11078 page 164 FILED: 10/23/2008 (purportedly signed on 09/04/2008) MERS as nominee for lender and David Smile to Deutsche Bank National Trust Company as Trustee under the Pooling and Servicing Agreement dated as of, whose address is 4828 Loop Central Drive, Houston, TX, 77081.

      WARRANTY DEED: HCDB # 11196 page 306 FILED: 02/12/2009 (also signed on 02/12/2009) Deed granting property from Connie Judge Smile to David Smile.

      PT61 FILING: Henry County PT-61 075-2009-001123 (deed of gift, no tax owed or paid.)

      *FORECLOSURE DEED: HCDB # 11721 pages 82, 83, and 84 FILED: 04/28/2010 (purportedly sold on 02/02/2010) McCurdy and Candler acting on behalf of Litton Loan Servicing purchased property at auction and then sold to Deutsche Trust, et al for $175,000.)


      *ASSIGNMENT: (2nd CORRECTIVE ASSIGNMENT) HCDB # 11721 pages 80 and 81 FILED: 04/28/2010 (purportedly signed on 03/22/2010) Adds to the Assignment the P.O.A. and Addendum to the P.O.A.


      *POWER OF ATTORNEY: HCDB # 11721 pages 75, 76, 77, 78, (and 79) FILED: 04/28/2010 (purportedly signed 08/12/2009) Actually, too much to summarize–yikes–but purportedly gives to Litton permission from Deutsche to do stuff that Litton can’t do. Nice try, though.

      *(ADDENDUM TO POWER OF ATTORNEY: HCDB # 11721 PAGE 79) FILED: 04/28/2010 Lists the inventory of trusts that Litton supposedly has P.O.A. over, including the GSAMP Trust 2006-FM2.

      *although these documents were filed simultaneously, the POA, the Addendum to the POA, and the 2nd Corrective Assignment “hit” before the Foreclosure deed “hit,” so they were, technically filed before the Foreclosure Deed. But they were not filed before the Foreclosure Sale. And that’s an obvious no-no.

      PT61 FILING: Henry County PT-61 075-2010-002014 (“first transferee foreclosure,” actual value $175,000, no tax owed or paid.)

      WARRANTY DEED: “SPECIAL WARRANTY DEED” HCDB # 12231 pages 320-325 FILED: 09/15/2011 (closed on 09/01/2011.)
      Grantor: Deutsche Bank National Trust Company as trustee under the Pooling and Servicing Agreement dated as of September 1, 2006, GSAMP Trust 2006-FM2
      Grantee: Herman Cain and Gloria Cain

      PT61 FILING: Henry County PT-61 075-2011-006943 (Actual Value of Consideration: $115,000. Tax owed and paid: $115.)
      (date of sale reported as 09/01/2011)
      Seller’s name: “Deutsche Bank National Trust Company as Trustee under the Pooling and Servicing Agreement”
      Mailing Address of Seller: 4828 Loop Central Drive, Houston, TX, 77081
      Buyer’s Name: Herman Cain 223 Montrose Drive, McDonough, GA 30253

  22. Benedict@Large

    SO has anyone thought about the fact that if Congress passed a law legalizing what MERS has done, it would be a violation of both ex post facto and eminent domain provisions of the Constitution?

  23. Jimmy D

    This article is innaccurate!. In fact, the Suffolk County Clerk in New York, Edward Romaine, whom now is an elected member of our county legislature, took MERS to Court. The Chief Judge of NY sided with Romaine, and ruled that MERS was more a scheme to avoid recordation, versus a more efficient industry tool.

    It is simple, if MERS is so efficient, which it is not, donate it to all the County Clerks around the Country and pay the recording fees. Moreover, stop stripping out the loans and pooling them over MERS prior to the alleged conveyance to the Trustee of the alleged private pool of certificate holders.

    MERS merely served the purpose of conversion, with the added effect of saving money, disguising true assignments, or lack thereof and finally; what better way to keep the Notes with the Seller Bank and issue cash flow and the Swap Proceeeds direct to the Pool after the Seller Bank is paid for the second time by the swap provider. Fianlly, all the credit enhancement happens while the loans are held at MERS, so the great minds could figure exactly how much insurance would be required to receive that Triple A Stamp.

    This is all going to unwind badly and after the next election, regardless of whom is elected, there will be a mass destruction of defrauded homeowners in the name of benefitting the entire country and economy!

    May God bless us all….

  24. Jimmy D

    @ antifa

    Meyer Rothschild said it much better in the 1800’s;

    ~ Show me a country where I cna control the currency- and it matters not who kaes the laws ~

  25. patrick

    So the use of MERS allowed the banks to “avoid” paying the recording fees on all of these changes of “ownership”. And they did this for over a decade or more before it became a recognized issue.

    The question we should be asking is why didn’t the dogs bark, i.e. the county recorders? They are legally required to record all land transactions in their county, so why did so many of them stay silent? They all have good contacts with the local real estate agents and the local banks; so how come the vast majority allowed their electors to be short changed?

    Some of these county recorders are guilty of either incompetence or maladministration (at best). So why is there no enquiry into this massive failure of local democracy? Sure the banks pulled a fast one, but thousands of county recorders and commissioners rolled over and let them. Democracy usually doesn’t fail with a bang, it does so supinely with barely a whimper.

    Not only the banks and Washington failed us, our local officials did so to.

    1. sleeper

      Exactly !!

      That’ why we ought to make sure to vote out the county recorders / clerks of court who didn’t.

      1) Collect the proper fees

      2) Properly record the real estate transactions.

      And have no doubt – these are generally local elections where just a few votes can make a difference.

  26. coboarts

    I once read that after the brief Mongol Empire retreated from Russia, the reason that Russian society was able to reconstitute itself rapidly and successfully was because they had established a solid system of documenting property ownership.

  27. Trestle Rider

    Perhaps Anonymous, the hacker group, can destroy the MERS databases. Then, in the due course of time, after chaos reigns and some in the group are caught, they can respond to their prosecutors that the MERS database illegally circumvented local law property recording requirements, therefore charging them with a crime is the same as convicting a vandal who messed up a meth lab garage.

    1. sleeper

      It doesn’t look as if that would be hard to do especially since MERS apparently relies on the honor system to record transactions.

      Then again MERs is most likely so screwed up that no help is needed to totally foul up the system.

      Of course if just a few folks (I could suggest a few bankers or vulture capitalists) were foreclosed on through MERS in would make for interesting theatre

  28. Tim S

    Wow! I’ve not read a more succinct assessment of the MERS mess, and what it means for property title in Amerika. I’m hosting a seminar on Quiet Title here in Portland Oregon on February 27th. I believe that is the answer, which forces the real party to come forward; “put up, or shut up” as I so enjoy saying.

  29. SoCal 7

    Good reading:

    The 9th Circuit, while they denied Cervantes’ appeal, laid out as clearly as any court what MERS is and does and its responsibilities. It gave other litigants, in its dicta, clues about where MERS is wrong, namely that it will be scrutinized when it forecloses (names itself sole beneficiary) in its own name, and that STATE statutes that are violated with that dedsignation, certainly California statutes.

    The court properly denied the appeal because it was an off-base argument vaguely asserting fraud and other charges against MERS, not citing the State laws/statutes. Other, more incisive and damning arguments are coming to a courthouse near you soon….

    I believe that Judges and even some congressmen/women believe MERS is a rogue, unlawful entity and once some cases support that, the MERS wall will come tumbling down.

  30. William Neil


    I wrote about MERS in a long essay called “10 Million Foreclosures: No Saving Private Ryan This Time” in January of 2011, and I’d be happy to send it to you in MS-Word version; I cover Professor Peterson’s testimony before Congress – and I think he’s thought more deeply and abstractly about MERS than any others. I found some press accounts of how it unfolded when MERS was first pitched to the Society of County Property recorders – which is about as close as MERS came to being “authenticated” – but I commented this was not a legislative forum,just a professional society – but there must of been lots of political feedback from the recorders to their local officials – it never resulted in a “national issue,” however. It was – is truly one of the great “under the radar” stories of how a major, major policy change escaped the democratic process – by design, I infer, not default.

  31. Senka

    Register of Deeds John O’Brien: “As I have been saying all along, they may think they are too big to fail, but as far as I am concerned, they are not to big to go to jail. The top officials at MERS, its member-banks, servicers and foreclosure-mill attorneys must be prosecuted and held accountable for their fraudulent schemes that brought profits to their institutions by cutting corners, circumventing land recordation systems through fraud, uttering and forgery.” –

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